Top Fed Official Says Policy Response Could Speed Faster Recovery

In remarks delivered virtually at a banking-industry conference, Mr. Clarida said the strong rebound in part reflected aggressive actions by policy makers at the Fed, in Congress and the White House to maintain access to credit and to provide relief to households and businesses.

“Additional support from monetary—and likely fiscal—policy will be needed,” Mr. Clarida said.

He didn’t go into specifics about what steps the Fed might take after it last month made more explicit its plans to hold interest rates for lower than it has done in past economic downturns. Most officials in projections last month indicated they expect to hold rates near zero for at least three years. The Fed isn’t anticipated to take new policy action at its next meeting on Nov. 4-5.

Mr. Clarida said the path of the recovery going forward will be shaped in part by the course of the virus, social-distancing responses and other mitigation efforts. The recovery in economic data that followed efforts in March and April to suppress the virus by reducing commercial activity had been “surprisingly strong,” he said.

This development was “especially noteworthy when set in relief against the surge in new [virus] cases that were reported this summer and the coincident flatlining in a number of high-frequency activity indicators that we follow to track the effect of the virus on economic activity,” he said.